Jobs & Unemployment
Published on September 19, 2019
Americans have debated the appropriate level for a federal minimum wage for decades. With the 2020 presidential election bringing new attention to the discussion, some politicians are pushing to gradually increase the minimum wage to $15 per hour nationwide—more than double its current level. Let’s take a step back and understand who earns the minimum wage, how it’s changed over the years, and how laws differ across states and even cities.
In 2018, 1.7 million workers, or 2% of all hourly paid, non-self-employed workers, earned wages at or below the federal minimum wage of $7.25. According to the Bureau of Labor Statistics (BLS), 82 million people were paid hourly rates in 2018. That’s 59% of all wage and salary workers in the United States.
Fewer Americans today make the federal minimum wage or less.
In 1980, when the federal minimum wage was $3.10 ($9.41 in 2018 dollars), 13% of hourly workers earned the federal minimum wage or less. Today, only 2% of workers do. The number of federal minimum wage workers has decreased from 7.7 million in 1980 to 1.7 million today. This is partly due to states establishing higher minimum wages than the federal level (more on that in a second).
The federal minimum wage was established as part of the Fair Labor Standards Act (FLSA) in 1938. Since then, the wage has increased via congressional amendments. It hasn’t changed since July 2009, when Congress set it at $7.25 per hour. However, 29 states and Washington, D.C. presently have higher minimum wages.
In inflation-adjusted 2018 dollars, the federal minimum wage was at its highest in 1979, when it was equivalent to $9.99 per hour in 2018 dollars ($2.90 at the time). If a worker earning the federal minimum wage in 2018 worked 40 hours per week, every week of the year, they would earn just over $15,000 annually. That’s less than half of the US median annual wage of about $37,719, but more than the individual federal poverty threshold of about $13,064.
The minimum wage and the living wage are not the same thing.
The minimum wage should not be confused with the living wage. The minimum wage is established by Congress and enforced by the Department of Labor. The living wage is a subjective concept calculated by policymakers and advocacy groups that works backward to calculate a wage to cover the basic needs and expenses of individuals in particular areas.
Federal minimum wage law doesn’t cover all workers.
Not everyone is required to receive the federal minimum wage, which partly explains why the BLS measures workers “at or below” minimum wage. Various exclusions and exemptions can mean some workers may earn less than $7.25 per hour. For example, the federal minimum wage for tipped employees is $2.13 per hour so long as that amount plus tips received equals at least the federal minimum wage. Workers 20 years old or younger may earn $4.25 an hour for their first 90 consecutive days of employment. Plus, federal minimum wage law only applies to employees of enterprises with an annual gross volume of sales of at least $500,000 or certain types of smaller firms.
States can also set minimum wage laws. However, when employees are subject to both the state and federal laws, they‘re entitled to receive the higher wage rate of the two. According to the Department of Labor, state minimum wage laws in 2018 ranged from $5.15 per hour in Georgia and Wyoming to $13.25 per hour in Washington, D.C.
In 2018, there were five states without minimum wage laws, two states with minimum wages below the federal minimum, 14 states with minimum wages at the federal level, and 29 states, plus Washington, D.C., with minimum wages above the federal level. This is a significant change from 1980, when only two states, plus Washington, D.C., had minimum wages above the federal level.
Some states have larger proportions of minimum wage workers than others.
Some states have more minimum wage earners than others. For example, in Louisiana, 4.5% of hourly workers, or 49,000 people, earn the federal minimum wage or less. In Washington state, 1% of hourly workers, or 13,000 people, earn the federal minimum wage or less.
Some cities and states are already moving towards $15 per hour.
While no state currently has a minimum wage of $15 per hour, New York, California, and Massachusetts have plans to gradually raise it to $15. Cities including Washington, D.C, Los Angeles, San Francisco, and Seattle also have ordinances to increase the minimum wage to $15 per hour or more. In Seattle, the minimum wage for large employers (more than 500 workers worldwide) is set at $16.00 per hour for 2019.
In July of this year, the US House of Representatives passed a bill to raise the federal minimum wage to $15 per hour, with the Congressional Budget Office (CBO) releasing a report the same month analyzing the potential impact. The CBO report estimates that changing the federal minimum wage to $15 would increase the wages of 17 million workers in 2025. However, the CBO estimates that 1.3 million individuals would become jobless (CBO estimates that this number could be anywhere between 0 and 3.7 million). The report explains that this decrease in employment is due to a need for employers to decrease their workforce to compensate for increased wages.
Many of the 1.7 million minimum wage earners are young, with almost 70% being 16 to 34 years old. About half of minimum wage earners completed some or all of high school. There are more female than male minimum wage earners, and the percentage of minimum wage earners differed a small amount by race and ethnicity. About 3% of black hourly workers earned the federal minimum wage or less; about 2% of white, Asian, and Hispanic hourly workers earned the federal minimum wage or less.
Who’s earning the federal minimum wage? The food service industry has the highest proportion of workers earning the minimum wage. Two percent of food service workers earn the federal minimum wage, with another 12% earning below the federal minimum wage. Unlike other industries, more than half of these employees (servers, cooks, cashiers, etc.) are paid at an hourly rate. Personal care occupations, including manicurists, hairdressers, and cosmetologists, have the second largest proportion of workers at/below minimum wage (3%).
Just over half of minimum wage workers work 0 to 34 hours per week, with 15% in the 20-24 hours per week range. More than a quarter of minimum wage workers work 40 hours per week and almost 3% work over 40 hours per week.
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